Things are looking a lot better in markets since the Christmas holidays. Stocks staged an impressive comeback, the price of crude oil moved over $10 per barrel higher than the low on December 24, gold is flirting with the $1300 level, and silver is working its way towards $16 per ounce. The dollar index slipped from its high after the December Fed meeting which provided lots of support for many commodities prices.

Meanwhile, one market that tends to be a bellwether for the commodities asset class and diagnoses the overall health and wellbeing of the global economy has not made any progress on the upside, and at the beginning of this month, it fell to a new low.

Source: CQG

As the weekly chart highlights, support for COMEX copper futures stood at the mid-August low at $2.5520 per pound which held through the end of 2018. However, during the second session of 2019 on January 3, the price fell to $2.5430 per pound. Copper declined to its lowest price since June 2017 at a time when other commodities prices were moving to the upside. As the barometer for economic growth, the price action in copper is a warning sign for markets as the rebound following the most recent bottom has only taken the price of the red metal to just under the $2.70 level and settled at the $2.6375 level on Thursday, January 10.

Copper has been in a bearish trend since failing to reach a new high in June when the price rose to $3.3155 on the nearby futures contract, 0.65 cents shy of the late 2017 peak and area of technical resistance. The price turned lower on the back of a rising dollar, the trade dispute between the US and China, and an overall environment of falling commodities prices.

While copper only declined to a marginal new low at $2.5430 on January 3, it is a sign of weakness and another lower low in a bearish trend that commenced in June. One of the most perplexing issues facing the copper market is that the price weakness has occurred at a time when inventories on both the London Metals Exchange and COMEX have been declining. LME stockpiles hit a high at 388,000 metric tons in March 2018, and as of January 9, they stood at 132,675 tons, a drop of over 65 percent. When it comes to COMEX inventories, they are over 30 percent lower over the past two months falling from 152,000 to 105,000 tons. Typically, when stockpiles in a commodities market decline, it tends to provide support for the price. However, the copper market has ignored not only significant decreases in inventories, but rebounds in the prices of oil, gold, silver, and other commodities over the recent sessions. Copper is likely watching economic conditions in China which is the demand side of the fundamental equation for the red metal, and it does not like what it is seeing out of the Asian nation these days.

As a bellwether commodity, copper could be sending some ominous signals for other commodities as well as the S&P 500 and other equity markets given its recent new low and its failure to stage a significant recovery.

The price action in the copper market could be telling us that volatility in markets across all asset classes is far from over.